Capitalism and Its Critics: A Long-Term View

"It is easier for a camel to pass through the eye of a needle than for someone who is rich to enter the kingdom of God," quotes the Gospel of Mark (10:25). Through sermons, visual imagery, and scriptures, the moral doctrine of the Christian Church shaped the views of the educated as well as the mentalities of the broad population in medieval Europe. It is true that this doctrine could concede to the useful role of merchants and the ethical value of work and property. It could also be interpreted very flexibly. However, in this doctrine the love of money is seen as a root of evil, and the conviction was predominant that the gains of one person would always imply losses by others. Within this worldview there was much distrust of great wealth and the practices of merchants, which after all included credit taking, profit seeking, and competition. In the name of brotherly altruism and virtuous selflessness, Christian morals have distrusted the resolute orientation toward self-interest and have opposed certain capitalist practices, particularly money lending for interest. This was seen and forbidden as usury, at least if practiced vis-à-vis "thy brother," that is, members of someone's own group or religion, not necessarily vis-à-vis strangers or others (Deuteronomy 23:20).³

Certainly, this doctrine has been circumvented in many practical ways, and in many ways the Church has positively contributed to the rise of markets and capitalist practices. Nevertheless, well into the sixteenth and seventeenth centuries, a disposition that was either skeptical of or hostile toward capitalism was dominant in Europe's theologies, philosophies, and theories of society. This skepticism was amplified by the Republican humanism of the Renaissance, with its reliance on the rediscovered Aristotle, and his claim to defend public virtues and values against particularized self-interest, private wealth, and corruption.

The widespread distrust, moral rejection, and intellectual criticism, however, neither prevented nor perceptibly hindered the rise of capitalism in medieval Europe. Similar to other parts of the world such as Arabia, China, and South Asia - although a little later than there - merchant capitalism asserted itself in Europe. Long-distance trade was the leading sector, across the seas and over land in Asia. Merchants used kin-based, origin-based, ethnic and cultural ties in order to build trust, protect themselves against robbery and aggression, or to solve economic problems through non-economic means. Most of them were pious Christians. They must have shared the religiously founded reservations against profit seeking and accumulated wealth. Merchants accommodated to such prevailing attitudes, to some extent, by adopting a lifestyle and imagery compatible with religion, by donating heavily to charity, by creating foundations, and often also by making a "final penance" in old age through large transfers of wealth to monasteries and churches.

At the same time they behaved as capitalists do, though within a basically non-capitalist environment. They were ready to accept high risks, they granted and received credit, they invested and competed with one another, and they strove for profit and accumulated wealth. Particularly when combining trading with banking, they could become very rich and influential. They used different legal forms for their projects and enterprises, both in the Roman Law and in the Common Law tradition. They invented new methods of transmitting, crediting, paying, and computing such as double bookkeeping "alla Veneziana". Most projects and enterprises were limited in size and short lived, but some were already multi-branch and multi-local enterprises, which sometimes survived the lifespan of their founders and were transferred to heirs and others. Merchants and bankers, frequently merchant bankers, were at the core of this very dynamic system.⁴

Compared with other parts of the world, especially China, merchant capitalism in medieval Europe had two characteristics that deserve to be emphasized. On the one hand, merchant capital, at some points and still to a very limited extent, transcended the sphere of distribution and penetrated the sphere of production. This happened both in mining, with its huge capital requirements and often quite extensive plant operations based on wage labor, and it happened in the cottage industries. Here and there, merchants began to exercise influence over artisans and cottage workers - that is, over the producers of goods they intended to market - by advancing raw materials to producers, placing orders, and sometimes also providing tools. We find numerous examples of this in the history of the wool trade in northern Italy, Flanders, and Brabant, starting in the thirteenth century at the latest; an early form of what was later termed proto-industrialization.

On the other hand, there were moves toward early forms of finance capitalism. From the outset, banking transactions contained elements of speculation. They were settled, to the extent that they arose, by merchants along the way. Specialization in financial business started, and banks began to emerge in North Italian cities after the twelfth century. There were already 80 banks in Florence in 1350, some of them with several branches in a number of European countries. They used the money deposited with them for financing businesses of different types. In addition, they issued bonds to city governments, landed and manorial estates, and eventually also to the highest-ranking spiritual and worldly rulers of Europe, who were in constant need of money and found it difficult to wage their wars, fulfill their ceremonial obligations, and promote their territories' expansion. State formation and the origins of financial capitalism were closely connected, and this nexus enabled prosperous urban citizens, a small elite, to establish their influence on politics while simultaneously making their entrepreneurial success dependent on powerful rulers and their shifting political fortunes. This pattern continued in the following centuries.

It seems that European capitalism was not the first, but had already become particularly vigorous before 1500. Its dynamics were linked to - and conditioned by - the peculiar dynamics of Europe's political structure, which was defined by the plurality of competing and sometimes fighting political units, in contrast for example to China and its comprehensive empire. This pluralistic political structure offered European capitalists particular incentives, opportunities, and influence.⁵